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The Nikkei 225 (INDEXNIKKEI:NI225) Futures are looking corrective both up and down at the moment, with only three discernible waves off the Oct 25 low, and only three discernible waves off the Oct 30 high. This was the expectation under the red count, and would call for a c-wave back up to roughly the 14,600 region to complete wave 2 before turning down again in a strong wave 3 to new lows.

This is the scenario that has to be expected at this time given the current price structure. Important support for bulls is still being maintained at 14,100, but so far this is not looking like a wave 3 to the upside, but instead just a corrective consolidation. Therefore, unless 14,665 is breaching in an impulsive manner to the upside, favor must be given to the bears at this time, and it is looking like our rally to new highs is going to be delayed. If still long, please at least maintain a sensible stop and consider exiting the position around 14,600 if we see it again. You can always re-enter if another setup presents itself.

The Euro STOXX 50 has still refused to budge from these levels, chopping around in a very ugly fashion much like the DAX Index (INDEXDB:DAX). This is another chart that I do not view as offering any attractive trade setups at the moment. Resistance above from here is roughly 3,070 – 3,080, with a chance of 3,110 being seen.

You will notice that the labels on my chart have changed slightly, as I wanted the counts and colors to accurately reflect what is shown on the daily chart. Therefore, the red count now represents a larger ending diagonal c-wave, in which price is currently finishing wave c of 3 with an ideal target of 3,108. This would be followed by a wave 4 pullback to roughly 2,985-2,955 before setting up a fifth wave higher to 3,190-3,240.

The more I study the daily chart, the more this count seems to make sense. The blue count is similar to the previous red count, which has price topping in a wave c of 3 in a smaller ending diagonal c-wave. Under this count, resistance should be met sooner, around 3,075, and lead to a pullback in wave 4 to roughly 2,980. The fifth wave in the blue count would likely target lower on the daily chart, near 3140.

Garrett Patten is a technical analyst and chief educator for ElliottWaveTrader.net, a live trading room featuring Elliott Wave analysis on market indices and stocks. Mr. Patten's focus is primarily on U.S. and international equity indices, and demonstrating the capabilities of unconventional technical analysis. His articles appear on sites including MarketWatch and SeekingAlpha.